From the beginning of human civilization, lenders have sought ways to mitigate the risk of losing their loaned principal. Several mechanisms have helped to reduce risk, the most common among them are “over-collateralization”, the process of having the underlying asset be more valuable than the loan amount (for example a house should be worth more than the mortgage), “know-your-customer”, the process of collecting personal data, income, credit scores and other information to compute the ability and likelihood of loan repayment and “default recovery”, the process of recovering the loan value through force or default (banks use the legal system and repossession agents).
Cryptocurrency's immutability and security models make all of the traditional risks even greater. X7 solves all of these difficult problems by implementing a stop to liquidity events through the Xchange and Lending Pool architecture. This paper will explain the product functionality and architecture that enables X7 to operate.
